The ECB raised rates last week (more info below) and are now at the highest level since the inception of the Euro at the turn of the century. To state the obvious, this represents a very different monetary backdrop to the one that was experienced since the financial crisis right through to 2022. The market had to contend with several ‘taper tantrums’ during that period (most notably in 2013 and Q4 2018) but rates are now firmly in positive territory across developed markets, and a negative interest rate environment is starting to feel like a distant memory. Even the ultra-loose Bank of Japan have conceded and moved to tighten policy.


 We have talked several times in recent years regarding the concept of ‘inflection points’ and the last 18 months are likely to be considered as a pivotal one in years to come. The impact on markets continues to unfold. Narratives such as higher mortgage rates, the depletion of excess savings in some countries – and the increase in others, the return of positively yielding bonds, the reduction of stock buybacks continue to inform our thinking and positioning here at Zurich.


We will be discussing some of the above at our in-person Retirement Conferences over the coming weeks and we hope many of you will be able to attend. Further details and registration is available here.


As always, if you wish to discuss anything in this newsletter in further detail, please do get in touch.


Weekly Investment News


The ECB raised rates by 0.25% on Thursday afternoon, which brought the headline deposit rate to a new historic high of 4.0%. Christine Lagarde and her colleagues will have to strike the right balance going forward as sticky inflation has to be weighed up against slowing economic growth. The market consensus is that the ECB will now pause hikes over the coming quarter. Core eurozone government bond yields finished the week up as markets digested the rate hike and accompanying commentary. Equities moved higher last week as the narrative of a ‘soft landing’ continues to hold the attention of market participants.


In the US, inflation figures for August came in higher than expected with the headline figure rising from 3.2% to 3.7%. However, when volatile components (such as energy) are stripped out, the core figure moved from 4.7% to 4.3%. The bond markets didn’t move massively on the news, attributing much of the rise in the headline figure to higher oil prices as West Texas Intermediate hit $90 per barrel for the first time since last November. Overall large cap stocks outperformed although the world’s largest company, Apple, came under pressure following a lacklustre market response to their latest product launch. However, tech stocks were boosted on Thursday as the IPO of Arm Holdings (the biggest this year) was a success with the price surging 25% on its NASDAQ open.


There were mixed results elsewhere on the economic data front, as UK GDP fell 0.5% in July and the unemployment rate ticked up higher to 4.3%. On the other hand, Chinese retail sales and industrial production beat consensus expectations whilst the PBOC also loosened bank reserve requirements to boost liquidity.





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